Recently, Colorado bankruptcy judges have penalized bankruptcy document preparers who charge more.
In the Cordova1 case, Judge Brown ruled that bankruptcy petition preparers may not charge more than $200 without court approval. In that case, Judge Brown decided that the BPP should not have charged more than $150 and ordered the BPP:
- to turn over to the bankruptcy trustee the unreasonable $499 fee charged and
- to pay $2,000 to Mr. Cordova, the debtor in that case.
In the Herrera2 case, Judge Romero ruled that two people overcharged a debtor by collecting a $1,000 fee for bankruptcy help. Judge Romero also observed that the BPP had charged debtors $1,000 in other cases but on court forms the BPP reported that he had been paid much less. In the Herrera case, Judge Romero ordered the two people involved:
- to turn over to the bankruptcy trustee the excessive $1,000 fee charged and
- to pay $2,000 to Ms. Herrera, the debtor in that case.
Here's what the bankruptcy court has to say about petition preparers:
Beware of bankruptcy petition preparers who do not comply with all legal requirements. The role of non-attorney petition preparers is solely to type information on Bankruptcy Forms (available at this link without charge). Petition preparers are barred by law from providing legal advice - they cannot explain how to answer legal questions or assist in bankruptcy court. Petition preparers must sign all documents they prepare; print their name, address, and social security number on such documents; and furnish copies to the debtor. They cannot sign a document on the debtor's behalf or receive payment from the debtor for court fees.
A bankruptcy petition preparer violates the law if the BPP does not enter into a written contract or overcharges for typing the bankruptcy forms. A BPP must
(1) . . . execute a written contract with [you] that explains clearly and conspicuously—(A) the services such agency will provide to [you]; and(B) the fees or charges for such services, and the terms of payment; [and](2) provide [you] with a copy of the fully executed and completed contract.3
Don't let a bankruptcy petition or document preparer charge you more than $200. If a BPP has charged too much, you may be entitled to the greater of $2,000 or twice the amount paid to the BPP in addition to your attorneys' fees and costs.4
Contact the local U.S. Trustee's office if a bankruptcy petition preparer charges too much, violates bankruptcy law, or commits any fraudulent, unfair, or deceptive act. There are also a few bankruptcy attorneys helping people who have been unwitting victims of BPP violations.
1 Case No. 11-24204, decided May 15, 2012.2 Case No. 12-12026, decided September 17, 2012.3 Section 528(a) of the Bankruptcy Code.4 Section 110(i) of the Bankruptcy Code.